LET’S TALK ABOUT MIGRATION & HOUSING. IT NEEDN’T BE TABOO.

Inbound net migration is an interdependent part of our housing ecosystem and warrants a long-term strategy integrated with our full suite of spatial planning and housing policy and law. There is no such strategy. The influence inbound migration has on housing demand is evident in the magnitude of the ~930,728 migrants estimated by the OECD to have arrived in New Zealand for the period 2011-2021. As a percentage of our total population this inbound foreign migration represented an average annual rate of inflow of ~1.8% or ~3.67x the average OECD rate of inflow. Subject to the balancing effects of overall migrant flows, that level of externally-sourced population growth will place obvious pressure on our housing ecosystem if the required homes and related infrastructure (both economic and social) have not been planned for, funded and built.

Inbound migration and the absence of any kind of strategy here in New Zealand is something that captured the attention of the New Zealand Productivity Commission (NZPC) and was the subject of its wide-ranging 2022 report ‘Immigration — Fit for the Future’. The opening comments in that document by Dr. Ganesh Nana highlight the need for a more integrated approach to inbound migration policy, where he says “The Commission’s core recommendation is for the Government to more effectively manage absorptive capacity together with migrant inflows to ensure consistency with expected population growth.” The NZPC has since been disestablished by the Sixth National Government.

The mandate of the NZPC was on improving our national productivity and its report was undertaken applying that lens. The report echoes concerns in my book Neo-Liberal Zombies that much of New Zealand’s economic policy has been focused on growth instead of the relevant issue. For the NZPC that issue was productivity. For me the focus is on how to improve housing outcomes. The NZPC said, “Much of New Zealand’s economic policy and strategy — including immigration policy — has been focused on GDP growth rather than improvements in productivity. Yet it is productivity growth that matters most for improvements in living standards and wellbeing more generally.” It concludes that “immigration is not likely to be the solution to the productivity challenges facing 21st century Aotearoa, nor is it the cause or source of our productivity problems.”

In relation to housing and related infrastructure, the NZPC found that investment in public-funded infrastructure had not matched growth in population — especially post GFC — and this has resulted in an obvious infrastructure ‘gap’. In relation to housing specifically the NZPC said “Increased housing demand (for example from population increases) has a larger impact on prices today than it did in the past. House prices now rise more rapidly because housing supply is slower to respond to demand. When demand for housing increases, New Zealand now builds one-quarter to one-third fewer homes now than the middle years of the last century.” Government policy has conflated growth with both productivity and affordability.

The NZPC called for a government policy statement (GPS) on migration to improve the transparency and quality of decision-making. In relation to planning for population growth, the NZPC said “A GPS would promote longer-term credibility about population projections and planning ranges for migrant volumes. It would increase certainty for the general public, businesses, communities and other stakeholders such as local government. This in turn would help these parties to plan and implement long-term investments” and that “By requiring Ministers to make clear policy choices about migration (including fiscal and regulatory choices) a GPS would inform the public about how the Government will adjust migration and/or absorptive capacity should net population growth threaten to put damaging pressure on the latter.” The absorptive capacity noted by the NZPC encompasses transport, communications, land supply, housing infrastructure and associated health, education and community infrastructure and is “not a fixed constraint” but rather something that needs to be planned for in the context of population.

Like migration, population growth is a touchy subject influenced by many factors, including socio-demographic mix, ageing trends, economic trends, global threats, migration inflows and outflows, personal fundamental beliefs (e.g. religion or what’s sustainable for the planet), human DNA (natural selection) and of course state policy. New Zealand has no national population strategy defining what is socio-economically beneficial or sustainable and given the potential for reputational self-implosion it is unsurprising that politicians have studiously avoided the topic. But population strategy need not only focus on population at the national level. It can be more nuanced, for example, targeting ‘talent’ to diversify and improve our society, or proactively prioritising where population additions might best occur sustainably so as to utilise scarce resources more efficiently and ensure any benefits flowing from population clusters are more socially-diffuse. However, the suite of national policy statements and ministerial directives on urban development between 2017 and 2025 more closely resemble ‘picking winners’ policy weighted toward urban areas already enjoying a large share of economic activity. Based on 2025 data the Auckland Region accounted for ~38% of national GDP and the “Golden Triangle” of Auckland, Hamilton and Tauranga ~50% of both national GDP and population. There is no evidence-based linkage in the entire suite of urban development and housing policy statements and ministerial directives with socio-demographic trends, including net migration inflows and nothing that examines the sustainability of the choices made in relation to economic and social infrastructure availability and funding, or our natural environment. It’s just about GDP growth.

The influence inbound net migration has on housing markets has been the subject of research in many countries including here in New Zealand with variable findings. In a 2008 Motu working paper ‘Housing Markets and Migration: Evidence from New Zealand’ the authors found no evidence increases in foreign born migrants to an area is positively correlated to increases in house prices “despite there being a strong correlation over time at the national level”. In contrast, the authors noted a “strong positive relationship between inflows of New Zealanders previously living abroad into an area and the appreciation of local housing prices, with a one percent increase in population resulting from higher inflows of returning Kiwis associated with a 6 to 9 percent increase in house prices.” The researchers were careful to qualify the findings based on the choice of time period and also noting other factors may be more influential on house price growth. A follow-up working paper by Motu in 2019 similarly found that “Although international migration flows are an important contributor to population fluctuations, we find little evidence of systematic effects of international or domestic migrant composition of the local population on prices or quantity”. The researchers concluded “that on average a 10-percent increase in local-area population is associated with an increase in house sale prices of 4-6.5 percent. We find similar but somewhat weaker effects of population on apartment sales prices; but no effects on rents.”

In a University of Waikato working paper ‘The Effects of Immigration on Local Housing Markets’ the authors review evidence from Canada, France, Italy, New Zealand, Spain, Switzerland, United Kingdom and United States which indicates “immigration will lead to higher house prices and rents, and lower housing affordability.” The researchers concluded that “On average, a one percent increase in immigration in a city may be expected to raise rents by one-half to one percent and the effect on prices is about double that.” In framing their research methodology the researchers draw on their earlier work and include a summary of factors influencing the housing market.